5 ways Blockchain will Impact the way you Manage Employee Benefits

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With over 17 years practicing strategic marketing communications. Chitra understands business. Digital transformation, while empowering, can be intimidating - Chitra's editorial vision is to simplify it for practitioners without compromising on substance, and enabling functional teams to harness its true power. She has studied media & communications at the London School of Economics and Political Science, UK, and has worked with Timken, Tata Sky and Procter & Gamble (P&G). She is an avid reader, writer and loves observing people, animals, and nature.

Blockchain is taking center stage in HR Tech conversations, with good reason. In this feature, we investigate the 5 impact areas of Blockchain in general, set out some real-life applications of the technology, and focus on 5 specific impact areas for blockchain in employee benefits management.

Fear it or embrace it, blockchain technology is set to be the big disruptor in HR. It is going to change the way HR professionals use technology to execute strategies and plans in most areas of people management.

Remember when people tried to resist MS-Office till they were forced to trade in their typewriters for a desktop? Well, Microsoft is going to do it all over again – they announced Project Bletchley in 2016: their strategy to harness blockchain technology to ‘build real solutions addressing real business problems.’ When a company that works on the scale of Microsoft gets involved in new technology, you can be sure it will aim to soon go mainstream.

Instead of waiting for the tsunami to hit, let us- as HR professionals - understand how blockchain could transform the work we do.

But first, a quick recap of what blockchain is, just to put things into perspective. Today, an employee’s financial records are maintained by the bank, medical records by the hospital and performance and entitlements record with HR. Each of these systems strives to keep their data secure and thus inaccessible. However, each of them is a vulnerable system, open to fraud and mismanagement. If one makes a change impacting another, there is no way for all the parties to know about it. When the time comes to act on a particular claim or record, there is a need for multiple verifications, checks, corrections, approvals and data exchange. In short – time, money, effort and inefficiency dogs the current system, however, ‘computerized’ it may be.

Now, imagine if all these (approved) stakeholders could access everything about an employee record uniformly, the latest version in real-time. Verified and authenticated by all authorized parties. If each stakeholder could add on to a particular record and the changes would get automatically verified by other stakeholders and duly time-stamped so that each change could be tracked. Where the data belonged to everyone (decentralized blocks as part of a chain) and no one party had absolute control. The nearest similar example is how Google Documents works for internal teams: there is one single document, and those with access-rights can make comments, everyone could see the changes and weigh-in on them with comments if required.

In such a scenario:

The enormous costs and effort invested in requesting, sharing, authenticating, validating, and cross-checking the facts...

in a secure environment...

for any inter-company, multi-party information exchange...

with real-time system-wide updation visible to all parties...

would get minimalized.

Imagine that the entire mind-numbing process of record-keeping, record-sharing and transaction management could be easy, secure and cheap with blockchain, and you will see why it is gaining so much traction with business and technology leaders alike.

Based on this visualization, here are 5 ways blockchain can impact employee benefits:

Access: Everyone on the network can see all the information pertaining to something, without needing to rely on someone else to share it with them. Blockchain decentralizes the data – so no one person or entity has control over it or what happens to it; but everyone has equal access and control over it, including employees themselves. For example, an employee could transfer their funds seamlessly from one account to another, access their payroll in real time and also be aware of the benefits available specifically to them based on their history or performance.

Authenticationand validation: Since everyone on the chain needs to validate the data, and one can also view the entire chain of events preceding the current day data, it is difficult to tamper with records and histories. This means faster, smoother, safer approvals of claims, payouts, and reimbursements: Especially where third-parties are involved, such as in health and medical related areas. the also lets employees focus on their productive pursuits rather than following up claims and tracking down bottlenecks, such as approvals and sign-offs

Security and compliance: With this sort of single-track automated processing of vast amounts of administrative and transactional data, there is less human error. Combined with the multi-point authentication system, there is lower vulnerability to fraud. Smart contracts are one of the most common applications for blockchain technology across industries but is as relevant for the HR space. The biggest advantage is that it cuts out the middleman for executing the contract - and thus minimizes the cost of tracking, monitoring, modifying and enforcing all the hundreds of thousands of contracts managed under an employee benefit system, without compromising on compliance or contract conditions. Think of them as ‘smart’ or ‘self-executing’ contracts that are coded to intelligently execute the contract conditions: when a trigger event occurs (or doesn’t occur), the contract automatically enforces the next defined step.

Personalization: Because there is a single version of the truth for the data around each ‘record’ it is possible to have real-time personalization of ensuing actions around each record, and everyone concerned would still have the latest, validated information about it. This makes it possible to develop a completely personalized benefits plan for each employee with no incremental effort or cost.

Agility: With more process driven automation and less manual processing, complex multi-party verification and approval procedures becomes simpler and faster, since multiple stakeholders can review and signoff from one single system. This agility improves the business value of HR - automated benefits administration takes the burden of recordkeeping, validation, transaction management, and approvals off the hands of HR team members – that means they can turn their efforts to more value-adding activities such as employee engagement and experience.

Not only is this model becoming more complex to maintain security, the most glaring limitation is its natural reluctance to data sharing. Due to increasing security issues, financial companies are protective of their users’ data, which makes getting access to user data extremely difficult or costly.

A blockchain could act as a single source of data “truth” that users can pass to any financial service they use. This would not only reduce the complexity in the space by allowing financial data to be passed freely among different applications, but it would also boost security as data would be stored in decentralized networks instead of on individual servers.

For financial wellness providers like Edukate, I envision a day where we can use blockchain technology to maintain secure and accurate records of people’s financial histories, allowing us to make more intelligent recommendations about the most relevant workplace benefits.

Any process or function that is heavy on record-keeping and relies on authenticated information exchange from multiple parties for transactions could, in theory, benefit from blockchain. That makes benefits administration an almost certain candidate. Add to that these 5 areas of performance improvement enabled by blockchain, and you can see that blockchain will not be just a disruptor- it is also going to be a competitive advantage . Employers who leverage blockchain meaningfully will be in a position to serve employee needs better, faster and in more relevant ways than ever before.